Third Rock Ventures has established its third biotech fund in 6 years, bringing in a haul of $516 million for one of the most active groups of early-stage biotech investors in the world. The new fund, which brings the total it's raised to a whopping $1.3 billion-plus, will be used to launch another 16 or so drug developers.
Founded about 6 years ago, Third Rock Ventures has invested hundreds of millions of dollars in a portfolio of 31 biotech companies, most in Boston and more recently in San Francisco. While the venture industry contracted in the wake of the financial crisis, the survivors largely shifted their gaze to mid- and late-stage investments. But Third Rock was one of the few to stay focused on startups.
It's been a very successful formula, in terms of attracting investment capital. The TRV group--formed by a band of executives who spearheaded Millennium Pharmaceuticals and orchestrated its sale to Takeda for $8.8 billion--had already raised more than $800 million before today's announcement. And at a time when many venture firms struggle for months and months to garner fresh funds, Third Rock rolls along seemingly unimpeded. This new fund took only 5 months to raise, according to a spokesman for the group.
|Kevin Starr, partner--Courtesy of Third Rock Ventures|
Kevin Starr, one of the lead partners at TRV, tells FierceBiotech this morning that the venture group already has a pipeline of about 15 biotech projects under review. Unlike a classic venture group, Third Rock often likes to find a great idea and seed a lengthy review before launching a company. And it frequently ramps up new biotechs with its own partners holding interim executive positions.
This new fund should last another two or three years, Starr adds, sticking with the same timeline of four-plus new companies a year that governed its first two funds.
"What resonates with the limited partner base is our hands-on company building and working through the ideation stage to launching and building companies," says Starr. And there's no shortage of great projects to size up. TRV partners looked at 982 biotech plans last year, he says, and could only fund a fraction of the ones they thought qualified as ripe prospects.
Third Rock's companies include some cutting-edge pioneers, like ZafGen, focused on a next-gen weight loss drug, and bluebird bio, a gene therapy company. Early this year Shire ($SHPG) bought Lotus Tissue Repair, a Third Rock portfolio company, for about $50 million upfront and $275 million in milestones. That deal paid off with a profit in hand and a chance to make a 20x return--though it also stands out as a rare exit for the young Third Rock operation.
Asked about Third Rock's track record of two exits (including Alnara Pharmaceuticals), Starr notes that there's been a lot of activity that has added major value to the portfolio. Sanofi ($SNY) stepped in to collaborate on Warp Drive Bio, de-risking that deal. Genentech has a deal in place to acquire Constellation Pharmaceuticals, following up on a $95 million commitment to its epigenetics effort. Agios Pharmaceuticals, bluebird bio and Foundation Medicine all had major "crossover" financings in the last 18 months, with billionaire Bill Gates stepping in to support Foundation. All three of those companies could go public this year. And there are 21 programs in clinical development for the group, proving that "clinical development doesn't have to be forever."
Third Rock now has about 45 dealmakers in its group, which has grown to include a West Coast strategy. That head count is likely to rise by about 10 now, says Starr.
Starr and Levin are easy to spot in any venture crowd. They both prefer beachwear to the standard Brooks Brothers style you see at bargaining tables. But with their financial resources, it's an increasingly popular look in startup circles.
- here's the press release
Editor's Corner: Third Rock's $325M Shire deal was a big win for early-stage investors